New York's S&P downgrades Japan’s credit rating as spending surges during pandemic

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New York's S&P downgrades Japan’s credit rating as spending surges during pandemic

S&P Global Ratings, the New York City-based credit rating agency, often contemplated as one of the “big three” global rating agencies alongside Fitch and Moody’s, had lowered its outlook of Japan’s sovereign credit rating to ‘stable’ from a prior ‘positive’ citing a growing uncertainty over the world’s third-largest economy’s fiscal health as the far-Southeast Asian country across the Southern Pacific Ocean had already spent a significant amount to outweigh the pandemic-led economic slump.

Aside from that, latest development on Japan’s credit rating came forth as the country, whose public debt has been the highest among all of the industrially developed nations, was looking to approve a second budget for the fiscal year 2020-21 in a bid to tighten up its grip over its tattered finances.

Besides, followed by the latest S&P Global Ratings’ move to downgrade Japan’s sovereign credit outlook, several analysts were quoted saying that the S&P approach had highlighted the challenges the country was vying to overcome amid an already recessed economy.

Japan’s Govt. finances deteriorates further as two supplementary budgets lead to a deficit of 16%

Meanwhile, adding that the Japanese Government’s move to unfurl two supplementary budgets in order to overshadow the fiscal holocausts, which are howling in context of a clattering pandemic outbreak at large, would likely to widen the nation’s budget deficit up to 16 per cent of its entire GDP (Gross Domestic Product), S&P Global Ratings said in a statement, “Japan’s weak government finances have deteriorated further in fiscal 2020 owing to the COVID-19 pandemic.

The fiscal position should improve materially once the outbreak recedes and economic growth returns. Nevertheless, we expect the fiscal deficit will remain relatively high in fiscal 2021 through 2023. ” Nonetheless, adding to a shimmering ray of hope for the Japanese economy, S&P Global Ratings had also added on Tuesday that the massive stake purchases by the Central Bank of Japan, which so far holds more than 40 per cent of outstanding Japanese bonds, would likely to keep a lid on the Government’s debt-restructuring costs.